
Resilient Markets Close In The Positive
India’s resilient markets were in full flow on Wednesday, as they held firm and closed in the positive after hovering in the negative territory for brief periods

On Episode 575 of The Core Report, financial journalist Govindraj Ethiraj talks to Gaurang Shah, Senior VP at Geojit Financial Services, Bjarne Schieldrop, Chief analyst commodities at SEB as well as Prabhu Dhamodharan, the convenor of the Coimbatore-based Indian Texpreneurs Association.
SHOW NOTES
(00:00) Stories of the Day
(01:09) Resilient markets close in the positive in the face of India attacks on Pakistan
(12:12) Could $2.5 trillion of Asian holdings in USD start flowing out?
(14:24) China buys even more gold, cuts interest rates
(16:15) Oil prices are facing multiple demand and supply stress points? Where could they land?
(24:40) India sees never before levels of airport closures on border conflict
(26:08) After UK, could EU be next as India’s apparel industry gears up to capture more share
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Thursday, the 8th of May and this is Govindraj Ethiraj, headquartered and Broadcasting as well as streaming from Mumbai, India's financial capital, presently seeing unusual weather including thunder and lightning and some rains.
Our top stories and themes.
Resilient markets close in the positive in the face of India attacks on Pakistan.
India sees never before levels of airport closures on border conflict.
China buys even more gold and cuts interest rates.
Could $2.5 trillion of Asian holdings and US dollars start flowing out?
Oil prices are facing multiple demand and supply stress points, where could they land?
And after the UK, could the EU be next as India's apparel industry gears up to capture more market share?
Markets Hold Out
India's resilient markets were in full flow on Wednesday as they held firm and closed in the positive after hovering in the negative territory for brief periods during the day on Wednesday. India launched precision strikes against terror training camps in Pakistan and Pakistan-occupied Kashmir in the early hours of Wednesday. Some of these camps were linked to the execution-style attack on tourists by militants in Kashmir that killed 26 individuals last month.
India has stressed the non-military, non-civilian nature of these attacks and stressed on deep escalation from here on. India has also indicated in action, if not in words, in recent days that the economy will remain its focus. For instance, the breakthrough UK-India Free Trade Agreement, and more on that shortly, was announced by Prime Minister Narendra Modi literally a few hours before the attacks on the terror camps were launched.
Reflecting all of this, the census closed up 105 points at 80,746, while the NEC Nifty 50 was up about 34 points to close at 24,414. The broader markets outperformed benchmark indices with the mid-cap index of the BSE rising about 1.4 percent and the small cap rising a little over 1 percent. We did speak yesterday of the Indian market's resilience in these times of strain.
Similar situations in the past would have caused more panic in the markets, which has not happened at all. Remember, there are other negatives hovering around as well, including the yet-to-be-concluded tariff deal with the United States. So, what's driving this resilience that we're seeing in the markets right now, and indeed, more importantly, could it last?
I put this question to Gaurang Shah, Head Investment Strategist at Jiojit Securities, and I began by asking him to break it down for us.
INTERVIEW TRANSCRIPT
Gaurang Shah: The market correction started from last October till last December, then at the beginning of this year, we again saw FI coming back lock, stock and barrel and selling off. If my date and my levels are right, then after the announcement of the tariff on 2nd of April, Nifty made a low of 21,800 on 7th of April. And from those levels, in this couple of weeks, we are back at 24,400, 24,300.
What has made the market so resilient is, I think, first of all, the commitment of investors, especially in the local domain, that is the domestic institutional investors, and of course, by and large, retail investors who participate directly into equity. They were absolutely not disturbed by the fact that markets, if you talk about Sensex and Nifty, then from the all-time highs, we corrected close to about 16% or 18%, sector-specific, stock-specific, a little bit more. There was a continuous flow of liquidity coming and participating in the equity market, either directly or via mutual funds, SIPs or lump-sum investments.
Then, of course, came the whammy in the form of tariffs on 180-plus countries, won't go into much detail because we already know about that. And then, the realisation that we are not so overly dependent on our exports, manufacturing exports primarily to the US. And of course, whatever comes in from the US to our country, our government has already started to take steps to cut tariffs over there.
Then, of course, followed by the earnings season, fourth quarter. In between this, I think the rational thinking that was there was that, yes, we may get affected, we may have a consolidation period for some time, but all is not lost. That was the feeling by and large at ground level when I interacted with a lot of investors.
So, that continued to support the market in terms of resilience and not correcting the way the rest of the emerging market or some of the developed markets have corrected. Then, we had the earnings season unfold, which has supported the market. At least, if I am not wrong, and if I say this, that compared to the third quarter, whatever we've seen up till now in the fourth quarter has been a little bit more colourful and a shade better compared to the third quarter.
And the verbatim or the post-earnings press conference meeting and the outlook on businesses that, yes, we are likely to do better. In between all these things, FIs who are net sellers have now started to come back slowly and steadily. As we speak, I think late this evening, a Fed meeting is there and a decision on what the outlook is and whether the break cut is going to happen or not.
But my sense is that we are somewhere relatively better placed than our peers in the emerging market. And I would even go to the extent of saying that it is a better place than some of the developed markets also.
Govindraj Ethiraj: Right. So, the reason I asked about resilience is also to try and test whether that resilience can stay, assuming the uncertainty continues in some way or the other, because we are still faced with two or three types of uncertainty, one of which is the border conflict. What's your sense?
Again, if you look back at history?
Gaurang Shah: We still don't know how things are going to shape up in terms of the 90-day window that has been announced by President Trump, how things are going to shape up, whether actually there is going to be a rethink in terms of the levels of tariffs that were announced, whether there is going to be optimism in terms of, of course, India is doing its best to reach out and even US is doing its best to reach out to India. We are working. President Trump has already announced that, yes, India and the US are very close to finalising the BTAs and the FTAs and the tariff related issues.
Resilience, why I say that despite the kind of negativity that had created an overhang, I would have got a little bit more concerned had it been for a glut of outflow from the mutual fund and SIBs getting stopped. That has not happened. And in terms of retail participation, where we have a direct interaction with the retail investors, people are more confident and more mature now, and they are willing to commit long-term money in a market which is otherwise correct.
Five years back, if you would have asked me the same questions, yes, it was a worry because retail investors were running away, even if the market had to correct maybe about 5, 6, 7% or even 10%. But that has changed for good. And I think that is something that makes me draw a positive, a very strong positive in terms of this resilience staying for a long period of time, point number one.
Point number two, if earnings have to improve, the market will again readjust itself. And of course, the flows that were otherwise outflows are now steadily coming back, slowly but steadily. And in terms of the other issues that we are at, of course, yesterday we had good news going in terms of India and the UK.
It was three years' work in progress. And finally, the FTA has been decided and it will soon be signed, sealed, and delivered. Possibly even with the US in the next couple of months, I think we should be at the table wherein there will be signed, sealed, and delivery of the BTAs or the FTAs or tariff-related understanding that we have.
So my sense is that we will take some time to have a steady upside. We might be in a period of consolidation, at least in the immediate short to medium term.
Govindraj Ethiraj: Right. So what I'm taking away is that the factors that contribute to the bedrock of the market, which also builds up the resilience is, one is it's different. And secondly, it's at a much stronger level than we've seen in the past.
If you were to look now or drill down a little into sectors, how are you looking at the market and what's standing out, what's not standing out at this point?
Gaurang Shah: Well, I think financials, they've done well, barring one or two names here and there, banking, NBFCs, strong NBFCs, diversified NBFCs. Credit growth is definitely going to come through thick and thin. Improvement in terms of asset quality, both net and gross.
Recoveries coming through, provisionings coming back to the balance sheet. And of course, in the rate cut scenario, I think our thought process at GeoJit Investment is that after seeing two rate cuts this calendar year, we may possibly see two more rate cuts in the form of 0.25, 0.25 before we say goodbye to this calendar year, December 2025. Rate cuts will definitely have a positive impact on the loan book.
So banking and NBFC, banking and finance, both public sector banks, private sector banks and strong NBFCs will do well. Cement sector will do well, defence, cab goods engineering, consumption related themes, both discretionary and non-discretionary, we are likely to see a positivity. And with this announcement on some relaxation on auto, steel and anemone, I think the auto sector should also be in the spotlight.
So primarily, we are focussing on these sectors which are driven by domestic theme boards.
Govindraj Ethiraj: If I can supplement that, I have no concerns about some of the recent results in the financial space, public sector bank, private sector bank.
Gaurang Shah: There were two, three names, like for example, Kotak Bank, ICICI was a little bit of a miss, Bank of Baroda again was a little bit of disappointment. But Govind, look, I mean, if you are a long term investor, you don't decide on one quarter earnings, am I right? You decide on long term earnings.
And I absolutely agree that to meet any sector or any company within those sectors, there are difficult times, Govind. And no denying about it. But what you have to understand is how capable is the management or how capable is the company to come out from that kind of global scenario.
And I'm quite sure, with the kind of credit growth that is expected to pick up, I think all these names which did not deliver well, whether it is Kotak, whether it is Bank of Baroda, whether it is State Bank of India, I think they will definitely start doing well. So rather than taking out, deciding and exit on one quarter numbers, I think it is better to see a couple of quarters earnings and then take out.
Govindraj Ethiraj: Got it. Gaurang, thank you so much for your time and pleasure speaking with you as always.
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Meanwhile, the National Stock Exchange and the Bombay Stock Exchange have temporarily restricted access to their websites for overseas users.
According to Reuters, this does not impact the ability of overseas investors to trade on Indian markets. And the decision was taken after a joint meeting of exchanges on Tuesday in which cyber threats were discussed, according to that Reuters report. The rupee weakened on Wednesday to log its worst single-day decline in a month as worries over an escalation at the borders affected sentiment along with a fall in Asian peers.
According to Reuters, the rupee closed lower by about 0.5 percent at Rs 84.82 against the US dollar, its worst performance since April 9th. The rupee is likely to keep facing intermittent pressure depending on how the situation evolves. A trader at a Singapore-based hedge fund told Reuters, adding the Reserve Bank of India may step in to limit sharp swings.
It's quite likely and increasingly so that currencies are the bigger victims of uncertainty, including global uncertainty, as we've seen in the United States and with the dollar. So currencies are something to keep a close eye on, even if the stock markets are doing well, is what I would take away from this.
Asia's Currency Moves
Speaking of currencies, Asia is still reeling from the recent and dramatic upmove in the Taiwanese currency, leading to growing speculation of Asian economies reducing their dollar holdings, something they had assiduously built up after the 1997-98 Asian financial crisis.
The dollar could face a $2.5 trillion avalanche of selling as Asian countries unwind their stockpile of the world's reserve currency, according to Stephen Genn in a report quoted by Bloomberg. Genn is a co-founder and CEO of Urizen SLJ and was, before the founding of this firm, Managing Director of Morgan Stanley as Global Head of Currency Research, and he also had a stint at the IMF as Economist before that. Genn and his colleague Joanna Freer wrote in a note on Wednesday that Asian exporters and investors may have amassed an extremely large pile of dollars through the years, widening the region's trade surplus with the United States.
As the US-led trade war deepened, some Asian investors might repatriate chunks of funds or ramp up levels of protection against a weakening dollar, potentially triggering an exodus from the world's reserve currency, according to them. They also said that they suspected these dollar holdings by Asian exporters and institutional investors may be very high or extremely large, possibly on the order of $2.5 trillion or so, and therefore pose sharp downside risks to the dollar vis-à-vis these currencies, according to them in that report quoted by Bloomberg. Now, all of this is sounding more ominous after that dramatic jump in the Taiwan dollar on Monday, which increased speculation that Asia's policymakers may allow their currencies to appreciate versus the dollar as part of efforts to secure a trade deal with the United States.
So Bloomberg's dollar gauge has dropped about 8% from a February high, and all Asian currencies, including India, have strengthened versus the dollar in the past month. Stephen Genn also wrote that accelerating the multi-trillion dollar flows may be naked long dollar positions prevalent amongst Asian countries that run large external surpluses, referring to positions that are not hedged against fluctuations in the dollar. These include countries like China, Taiwan, Malaysia, and Vietnam.
There is an important imbalance in the world that puts the dollar in a vulnerable position, Stephen Genn wrote in that latest report quoted by Bloomberg.
China Buys More Gold and Cuts Rates
China's gold reserves have now risen for a sixth straight month in April, even as prices hold near a record, according to Bloomberg. Bullion held by the People's Bank of China rose by about 70,000 troy ounces last month, according to data available on Wednesday.
In the latest six-month span, volumes have climbed by close to one million ounces, or about 30 tonnes, says Bloomberg, adding that gold is up nearly 30% this year and has rallied to successive records as we've all seen. Some of it, or rather good parts of it, have been driven by concerted central bank buying as authorities have tried to diversify away from the U.S. dollar. Gold volumes on the Shanghai futures exchange also surged to a record in recent weeks, according to Bloomberg.
Elsewhere, China reduced its policy rate and lowered the amount of cash lenders must keep in reserves as it ramped up efforts to help an economy caught in a trade war with the United States. The People's Bank of China cut the seven-day reverse re-purchase rate to 1.4% from 1.5%, according to the central bank governor. That announcement came hours after China revealed it would hold its first trade talks this weekend with U.S. officials ever since the U.S. unleashed that 145% tariff on most Chinese goods. Back to gold, central banks have increased their gold purchases roughly five-fold since 2022 after a freeze on Russian reserves, according to Goldman Sachs, which also has been amongst the more vocal bullion bulls, according to Bloomberg. Goldman also estimated at that time that the People's Bank of China held about 8% of its reserves in gold, below the global average of about 20%, and also far lower than the elevated share seen in some developed economies. Spot gold was last quoting around $3,387 per ounce.
Oil Goes For A Walk
Oil prices rose slightly on Wednesday, gaining for a second session thanks to positive investor sentiment over the potential U.S.-China trade talks to be held this weekend and also signs of a lower U.S. shale output, which means lesser supply and therefore hopefully higher prices. Brent crude futures are now around $62.70 or just under $63 a barrel. Reuters reported that the U.S. and China are due to meet in Switzerland this weekend, and this could be a first step towards resolving the trade that's disrupting the global economy. Brent crude earlier hit a four-year low after the Organisation of Petroleum Exporting Countries Plus decided to speed up its output increases, and on the other hand, U.S. producers, or some of them have said that they would cut spending, cautioning that the country's oil output may have peaked, which is also contributing to the uptick in the market, analysts told Bloomberg. I reached out to Bjarne Schieldrop, chief commodities analyst at the Oslo headquarters SEB, and I began by asking him how he was computing the various demand and supply stress points in the oil market right now.
INTERVIEW TRANSCRIPT
Bjarne Schieldrop: To start with, it was quite confusing and surprising, and I think it took the oil market by surprise when they announced that they would lift production first by 411,000 barrels per day in May, and then yet again this weekend, a new message of a triple of the planned original increase. I mean, they planned to increase by 137,000 barrels per day per month all the way to December 2026, sort of a steady good plan, and then suddenly everything changed, and now they are sort of tripling the monthly output and lifting in production much more. The first appearance of the reason for this was, of course, these internal quota breakers.
Kazakhstan, Iraq, and the United Emirates produced more than they should, and they had done so repeatedly, and they were supposed to amend for previous breaches, and that sounded like a plausible explanation to start with, but now, latest days, increasingly, we're starting to question that as the main reason, because, I mean, we're talking about a few hundred thousand barrels of breaches, that being the foundation of OPEC plus or Saudi Arabia together with Russia just throwing in towel and changing strategy totally.
It kind of stretched as an explanation, and I think, increasingly, this boils down to the original plan OPEC plus with their cuts was all right. They cut deep and hard during COVID-19, and as a world emerges from COVID-19, world accelerates, and then global demand growth was supposed to grow more than non-OPEC plus supply, so that OPEC nicely could put back what they had cut under COVID, right, and I think that was still sort of the plan when they announced that, okay, from April, they would list production by 137,000 barrels per day per month, December 2026, so gradually ease it back into the market and everyone being happy and oil price not suffering too much, but I think what really broke that strategy was definitely the trade war from Donald Trump, which is then endangering global growth.
It endangers oil demand growth, of course, and then the whole plan of OPEC is just pushed out to infinity, and I think that is why I find that original plan didn't work, so we just have to sort of face weaker global growth and demand growth. We just have to sort of get on with the job of getting the production back into the market, and then the solution of the whole issue will then be less production from US shaler producers and more demand from global consumers in the face of lower oil prices.
Govindraj Ethiraj: At this point, the United States is looking like it's going to step up production. OPEC plus is stepping up production, so there seems to be, as some analysts are saying, a consensus that the US is pushing OPEC to produce more or reduce prices and the US wants lower prices. Are we able to look ahead and see where this could land, and it could be good news as well for countries like India because we'll see lower oil prices for a much longer period of time, but how are you reading this?
Bjarne Schieldrop: I mean, if you look at drilling rig count in the US, it has been sort of steady state around 480 oil drilling rigs since July last year, and I think that is where you would supposed to be seeing decline in activity in the US, and what we've started to see, I mean, one of the big questions is where exactly is the pain point of US shaler producers, like Bloomberg Unlimited Finance says it's like from cost break even from 40 to 60 with an average volume weighted production of around $50, but recent report from Dallas Fed doing a survey of US oil producers, CEOs, basically came back and said that the cost break even at the profit level needs to be $65 per barrel on average, and now the VTI price is below 60 both in the front and 18 months down the road, so we are well below that.
Okay, so maybe they have zero cash flow at 50 and still surviving, but they then cannot plough cash flow back into new production, and we had a diamond back out in the market talking about what they're planning to do, and they said, all right, we're actually going to cut three rigs and one frack crew and cut capex cost by $400 million this year, and basically saying we probably have peak production behind us for this round in early this year, and we're going to go downhill, and rig count is going to fall by 10% in the second quarter, so I think definitely prices are starting to hurt shaler producers, they are starting to change their strategy, and basically to make the equation add up, there is only one sector where you can have declining production rather quickly over a year or two, and that is indeed U.S. shaler production, so if OPEC is going to take back more market share faster, it basically means that the price needs to be at the price where U.S. production actually is declining.
Govindraj Ethiraj: We've seen all the tariff wars and we've seen shifts because of that, we've also seen America say, for example, that you cannot buy from Venezuela and so on, so how are you seeing flows today, I mean, in terms of where oil is being produced, how it's being shipped, and where it's being consumed, I mean, do you see any shifts in that because of all the trade wars that we've been seeing or the trade dynamics that we've been seeing in recent months?
Bjarne Schieldrop: Such a confusing picture, isn't it? With Europe or the EU not taking crude and oil products from Russia, so they have to send it around the world, and then instead the EU imports from the U.S. and the Middle East, and oil products maybe from India, re-exported or re-exported from China, so I mean, it's really a total change in flows. If you only look at the U.S., I mean, they only have a net surplus production of around 2 million barrels per day, if you look at what total production of liquids versus total consumption of liquids, including natural gas liquids and so on, but of course, they import a huge amount of oil from Canada, at least that was the usual plan before the tariffs, and so therefore, net exports are quite strong out of the U.S. Gulf because they import from Canada further north, but also, they have quite strong imports of crude from the Middle East because the refineries are made for heavy sour crude or medium sour crude originally because the U.S. expected to have a deficit of So, you know, it's a huge flow of crude and products around the world, but U.S. is, I mean, Donald Trump was announcing that we're going to have $50 oil and the U.S. is going to increase production with Real Baby Drill. Of course, that is fantasy. We're going to have lower oil prices and lower U.S. production.
Govindraj Ethiraj: Bjarne, thank you so much for joining me.
Bjarne Schieldrop: Thank you very much for having me on.
Unprecedented Airport Closure
The Indian government has closed around 16 airports in north and northwest parts of India for civilian movement from May 7th to 10th, and it did so hours after India struck terror targets in Pakistan and Pakistan occupied Kashmir. This is the first time such an airport shutdown has happened in recent history.
While airports have been shut down for civil defence reasons in the past, we've never had so many airports in India, particularly or including in the north and northwest region that is seeing the shutdowns now. Jitendra Bhargava, former executive director of Air India, told The Core Report. The 16 airports include Leh, Srinagar, Jammu, Amritsar, Chandigarh, Jodhpur, Jamnagar, Bhatinda, Dharamshala, Shimla and Rajkot.
Hundreds of flights have been cancelled and airspace restrictions have been imposed and most of the airlines have requested passengers to get in touch with them if they have tickets for any of these sectors and to keep themselves updated. Indigo, for instance, India's largest carrier, said that due to government notifications on airspace restrictions, over 165 Indigo flights from those airports like Amritsar, Bikaner, Chandigarh, Dharamshala, Gwalior, Jammu, Jodhpur, Kishangarh, Leh, Rajkot and Srinagar are cancelled until 5.30 am on the 10th of May this year. Meanwhile, several Asian airlines said on Wednesday they were rerouting or cancelling flights to and from Europe because of the conflict at the border.
More than two dozen international flights were diverted to avoid Pakistan airspace on Wednesday.
Tariffs and Garments
Tariffs and President Donald Trump said that America does not have to sign deals, they have to sign deals with us. They want a piece of our market, we don't want a piece of their market, he said during his meeting with Canadian Prime Minister Mark Carney, contradicting top White House officials' claims for weeks that such deals are the administration's top priority.
Markets fell after his comments, CNBC reported. The growing protectionism of the United States ironically may help other countries forge closer economic ties with each other. The UK and India agreed on a bilateral trade agreement that was announced on Tuesday night which will remove tariffs on most items within a decade.
Meanwhile, ASEAN and China are set to meet on May 19th to negotiate improvements to a free trade agreement according to Malaysian Prime Minister Anwar Ibrahim on Monday quoted by CNBC. So these are the new bridges that are being built thanks to the Trump tariff scare and many of those connections could bypass the U.S. which according to Trump does not need deals anyway according to that CNBC report. Meanwhile, let's pick one industry apparently exposed from India that could see a bump up but how could this play out and could it in any way mitigate a potential loss into the U.S. that's exposed into the U.S. assuming or in case tariffs do not come down sufficiently. I reached out to Prabhu Dhamodharan, convener of the Indian Taxpayers Federation which represents close to 500 companies in the value chain of textile manufacturing from standalone spinning companies to weaving and apparel and home textile companies and he's based out of Coimbatore and I began by asking him how he was seeing the UK-India FTA announcement and how it could help the industry.
INTERVIEW TRANSCRIPT
Prabhu Dhamodharan: Actually, the U.S. is a very different market. For example, large companies used to work with different markets because they may have a different set of manufacturing setup across the places and SME companies normally some companies used to work with the European Union and UK as an independent company and some other companies will work with U.S. because order quantity, the designs, the expectation both are very different for these two markets.
I can simply say that the UK is a very different and new opportunity for India.
Govindraj Ethiraj: Now if you were to go to the UK specifically, India's share of UK apparel imports is about 5 to 5.5 percent from what I understand. China is about 21, Bangladesh is about 18. So both these countries are much bigger than India at this point and India's exports are worth around 1 billion U.S. So what is the opportunity in your mind and which specific areas?
Prabhu Dhamodharan: Sir, before moving to the subject, first with my understanding from our association, we witnessed a lot of momentum from the government for the past few months to conclude this FTA. First we need to appreciate the efforts of the Indian government and Ministry of Commerce and a lot of inputs they discussed with industry and they successfully concluded this FTA. Why is this FTA a game changer?
We feel that this is the base FTA for a bigger FTA with the European Union. This already sets a very good base for further expansion of the theme of FTA. The UK is a very important market for us.
We need to understand one clear factor. Global trade is not growing at all. Even in all developed markets, whether you take textile or anything, only the growth rate is in the range of 1 to 2 percent.
It's not like India where every sector is growing in double digit or even double digit. We may not be happy with some earnings calls with listed companies, but those markets used to grow by 1 percent, 2 percent. So now the challenge is who is going to grab another market?
Only it's a competitive game. So in the UK already because of the duty advantage, whatever the UK imports like 18 to 20 billion dollars, Bangladesh has a dominant share. Because if we export a t-shirt from Tirupur or Coimbatore, we need to pay 12 percent duty.
For Bangladesh it is zero. An average t-shirt or any basic product costs around 170 rupees and in that 170 rupees, 12 percent is a big number. Because you know apparel manufacturing the entire value chain works on only 10 to 13 percent EBITDA margin and this 12 percent is not a simple number.
Now this is going out naturally. We may have a very very good level playing field with Bangladesh and only because of that advantage, Bangladesh is able to gain the market share because products are the same and whatever we make they are also making. So naturally now we have a very very bright advantage in my opinion.
Doubling our market share, like from the 1 to 1.2 billion dollar current run rate with the UK, we can easily add another 1 billion dollar with our own efforts and that is a big number. Because India's apparel exports have been stagnant for the past many years, this 1 billion dollar or 1.2 billion dollar will add 10 percent incremental growth to overall export.
Govindraj Ethiraj: Right and if you were to look at our ability to expand and this is the question I think I've posed to you earlier as well. How well geared are we and what are the specific areas for example would it be home textiles or knits and essentially whether in these specific areas or other areas how well are Indian manufacturers geared to grow or expand capacity.
Prabhu Dhamodharan: Okay good question. Actually even in the calendar year 2024 knitted apparels we exported in the range of 655 million dollars and woven apparels we exported in the range of 740 million dollars and foam textile in the range of 270 million dollars. These numbers are almost similar for the past many years and now the capacity wise any incremental order any company can absorb 10 to 20 percent very easily by pre-bottle necking and also going for small expansion in the brownfield expansions.
Many can do and few companies by expecting China plus one opportunity already started expanding in our region. We are witnessing good momentum in expansion particularly in the apparel sector. So a small incremental order definitely the sector can absorb.
This is the time industry also needs to be much more bold and invest in modern and end of the day competitiveness matters in trade and with this duty advantage we have a level playing field. Beyond that we need to build competitiveness so it's time for the Indian industry to invest boldly. Number one even one engineering player told an interesting example even there from our region.
China will always be capacity ready, they will build capacities and if any buyer comes immediately they will show and grab the orders and we also need to think on those lines and instead of waiting for each and every buyer confirmation. Now India UK FTA on and China plus one opportunity is really US buyers are now searching for good facilities and they are sending feelers across the world at least to five six countries and naturally even we don't know as you said how the rum tariff ends but everyone feels that relative terms India is safer and we may end up with lowest bracket of tariff. Third, we have raw material security.
India has abundant raw materials so we need not depend even if something happens tomorrow with some other country. We don't have for example Bangladesh or in any other country even for Vietnam you take cotton yarn. Cotton yarn has a robust spinning capability in the country.
We are the supplier for those countries even in fabric we have a robust capacity. So all these advantages all stars are aligning now. It's time for industry also, whether as an SME or a large corporate, to announce CAPEX to build world-class facilities so that we will be capacity ready to grab orders and use the opportunity and at least improve our export in double digit for the next 10 years.
We believe that apparently is the next 10 years' story in exports.
Govindraj Ethiraj: Right last question so you said that the opportunity or the one opportunity could be the EU. This would take as I understand about six months or so to materialise the India UK FTA. What is the size of the potential opportunity in the EU if tariffs were lower and where are we on that score?
Prabhu Dhamodharan: You're asking about the European Union? Yes. The European Union is a much larger market than the USA.
For example US imports 78 to 80 billion dollars. The European Union imports 90 billion dollars of apparels. So there also we have a 5 percent band.
Everywhere we have 5 percent market share. If Europe FTA concludes naturally we will double our exports there also and there are two things. One is that the industry needs to be fit to face these new orders.
Number one is build capacities, build competitiveness, and bring a lot of automation because labour is a big challenge in India, particularly in the southern part of India and we need to judiciously use automation and improve our efficiency. At the same time another area of concern for Indian industry is the policies. For example, from time to time the industry is worried about the raw material duties import duty on cotton.
For example China is now because they are facing turbulence everywhere. They are trying to dump goods in the Indian market. For example viscose yarn.
Now there is a gap. Viscose fibre is protected. Fabric is protected.
So there is a gap. Immediately they are jumping and imposing dumping here and the government is also very alert now. For example, later , huge imports came and the government stepped in and imposed duties.
Now it is reduced. Like that we need to be watchful and policy makers also need to ensure a very simple formula. In the raw material stage we should get competitive raw material without any import duties at international prices so that the industry also can boldly invest in future capacities.
And another very important point is Mitra parks. Mitra parks now many state governments Madhya Pradesh announced the launch of the park. That is also one area industries need to explore.
Seven parks are coming up. So as I said in the initial remarks all stars are aligning. Industry trade associations and governments all need a five year game plan in numbers where we need to apply our focus on cotton and how we can improve competitiveness on MMO.
Because at the end of the day this is a job creating sector. Every 1 billion dollar additional exports can create 1.7 to 2 lakh jobs. That is a big number.
Govindraj Ethiraj: Right. Prabhu, thank you so much for joining me.
Prabhu Dhamodharan: Thank you.

India’s resilient markets were in full flow on Wednesday, as they held firm and closed in the positive after hovering in the negative territory for brief periods

India’s resilient markets were in full flow on Wednesday, as they held firm and closed in the positive after hovering in the negative territory for brief periods